We Need More Metals Than Ever. But at What Cost? | Ep279: Rohitesh Dhawan

Rohitesh Dhawan

The future of this industry and its equipment is largely electric.

Michael Liebreich

Do all of your members agree with that, including BHP?

RD
Yes.

ML
What BHP is saying is, the equipment doesn't exist, we can't go electric. And I look at that and go, well, hang on a second, you're BHP, you know, you are the demand function. If you say the equipment should exist, it'll exist. And if you don't, it won't. So now you're saying, oh no, they're completely on board.

RD
The trucks that they operate there can carry up to 500 tons of material in one payload. Now, it might be hard, again, to get your head around 500 tons. Well, let me say this, one fully grown African elephant weighs about five tons. Imagine 100 elephants on one truck. Electrifying a 100-ton dump truck compared to a 500-ton mega truck is a very different exercise.

ML
Hello, I'm Michael Liebreich, and this is Cleaning Up. For 5,000 years, the mining industry has been finding ways of meeting the economy's insatiable need for metals and minerals. Without metals and minerals, there is no transition, no electric cars, no wind turbines, no solar panels, no batteries. Of course, without metals and minerals, there are no data centres either, missiles, drones, satellites, or all of the other essentials of modern life either. But as the industry rushes to meet demand, it is more important than ever that it does so in a way that is safe, just, and responsible.

That is the mission of today's guest. He's the president and CEO of the International Council on Mining and Metals, the ICMM, which describes itself as a global leadership organisation that represents a major portion of the international mining and metals industry, focusing on sustainable development, environmental, social, and governance standards, and safe, fair mining. Please welcome Rohitesh Dhawan, Ro, to Cleaning Up. Ro, welcome, thank you for joining us.

RD
Thanks for having me.

ML
Now, normally we start with our guests describing what they do in their own words, but you've heard me describing what you do. But do start us with, how did you get into this role? What were you doing, in a sense before, how long have you been doing it for?

RD
So, Michael, I'm an economist by training and a sustainability person in my heart. Now, I was born in India and raised in South Africa. That's important because both countries help you see the importance of the mining industry, because go to a rural part of South Africa and you won't see a data centre, you certainly won't see even a hospital or a school, but you will be pretty close to a mine. I learned pretty early on that if you really care about a better life for your fellow citizens, a safer natural environment, and a growing economy, the mining industry is one of the best ways to achieve that, especially in countries that are really rich in natural resources. And so I grew up as an economist, but with a deep passion for wanting to see a better life for my fellow citizens and for a better planet.

And I started my career as a management consultant, and I was serving companies in different sectors. So I served mining companies, I served cement companies, telecommunications firms, banks, and across all of those, it was very clear to me, Michael, that the industry that had the potential to cause the greatest positive impacts on the world and the industry that had the potential to cause the greatest harm in the world was the mining industry. And so when six years ago, I got the opportunity to take this job to lead what is a true unique body, not just in mining but across other sectors, it was a real privilege to do that.

ML
And the organisation had been set up, is it an old organisation, or were you the founding president and CEO?

RD
No, I stand on the shoulders of giants. It was founded in 2002. We celebrate 25 years next year, and at the time it was founded by just five companies, the chief executives of five companies at the time that recognised one very simple but uncomfortable truth, which was the world did not like or trust the mining industry. And they, I believe, were in an act of great leadership to say what that moment needs, which is the same as this moment, doesn't just require a PR exercise telling people why they're wrong about their concerns they have about the mining industry. They said, well, let's come together and demonstrate true leadership on the things that people care about. So they established this body, and it was actually a call from stakeholders saying what we would love to see is the industry voluntarily come together and show leadership on nature and human rights and the circular economy and health and safety and tailings and all the other things people really cared about.

ML
Let's stick with you just for a moment. And you're that point, that cusp where you joined the organisation, because you said that you're an environmental, you're a sustainability person at heart. But you were also interested in the ability of your industry, the mining industry, to do good, not just its history and its footprint of doing bad. So your take on sustainability was not “let's try and stop things”, it wasn't a kind of a blockers approach and that's fascinating. Talk to me about that, because so many environmentalists, and it's a very valuable role to stop people from doing awful things. But you always knew you would try and play, in a sense, the positive role? Or did that come to you when you came across this organisation, had the opportunity to join and lead it?

RD
Look, my training as an economist taught me that the private sector is a hugely powerful actor of influence in the world. That can be a positive influence, and it can be a negative influence. But my view of the world tells me that big business directed in the right way, when incentives to do good and do well are both aligned, is one of the best ways to make the world a better place. I have huge respect for activists and for people that try and stop things and put pressure on the system from the outside. I don't even think I would be effective at doing that. But I do think that I have the ability to speak to big business in a way that relates to their incentives, and to try and change the system from within.

And that's why I say that ICMM is so unique, because it is a body unlike any other in any sector, where the 26 in our case largest CEOs come together in a shared commitment to make the industry better. And so for me, I've always wanted to play a role in changing the system from within. And I'm so pleased that there is a community of NGOs and activists out there who recognise that we're not the enemy. In fact, we are pushing at the same outcome, they're doing it from the outside, we're doing it from the inside, and we're trying to take everybody along with us.

ML
And there's some history here where activists were incredibly effective at shutting down the nuclear industry. And now, I think it's fair to say most of them have realised that by far the greater evil was actually climate change. And so they're now doing what's known in, I think, Private Eye, the British satirical magazine, as the reverse ferret and having to change tack. Talk to me about the model of the ICMM, because you said it was founded by, was it five or six?

RD
Five.

ML
So five mining companies, and how does it operate? And how many members have you got now? And what's the kind of theory of change that the organisation pursues?

RD
So today, it's 26 companies, we account for over a third of the global mining industry. We have between us over 650 mines spread across 50 countries. It's the largest companies in the sector and it is at a CEO level. That's really unique, because it's the chief executive that personally is a part of this body and rolls their sleeves up to do the work involved in being a member of ICMM. It's not something you can just sign up to and not have to do anything with. Now, our theory of change is that when a substantial portion of the industry, in our case, over a third, collectively commits to move in a certain direction, that gives a level of momentum to that issue that on its own will achieve significant progress because of our direct reach and impact, but will quickly become the normative expectation for those that are not directly members of us, that it becomes the way that business is done in the mining industry.

Now we can, by showing leadership voluntarily, get the support of governments, of investors, of customers, and of local communities to get behind the right way of mining, which is what we try and stand for. So that even if you're not directly a member of ICMM, it becomes the normative expectation for you to do business that way. Just one example of that, Michael, would be the issue of tailings. Now, tailings are the waste rock that is produced when you mine. These large quantities of rock need to be stored in dams, essentially very, very large swimming pools. They are some of the most complex engineered structures on Earth. If they're not managed responsibly, and if they were to collapse, they can cause very significant damage.

ML
Let me come in there. I mean, when they collapse, because they have collapsed.

RD
They have.

ML
And they have caused multiple fatalities.

RD
Tragically, the most awful incident of that was in 2019 in Brazil.

ML
Brumadinho.

RD
Brumadinho, which is the town where this tailings dam collapsed and claimed 272 lives.

ML
I could be cynical and say, and this is your great success.

RD
The dam collapsing is not our success at all.

ML
You were going to, sorry-

RD
Yes, of course.

ML
I'm pushing you because you started saying that the tailings dams was an example of success. So continue, continue.

RD
The example of success is that post that disaster, the industry came together with a group representing investors, the principles for responsible investment, and with the United Nations Environment Programme to say, never again. We cannot afford to have a disaster like this ever again. And so we came together in record time to create something called the Global Industry Standard on Tailings Management. This is a technical standard that significantly raised the bar for how these facilities should be built and operated. And that has become the normative expectation of a responsible mining company. Now, if you're a member of ICMM, it's a condition of membership that you follow the standard.

But even if you're not a member of ICMM, there are investors that won't give you money, there are customers that won't buy from you, there are governments that won't give you a permit if you're not following the standard. So when I say this is an example of this body driving change, unfortunately, it took this horrible tragedy to lead to the standard. But as a result, it's made tailings dams everywhere safer.

ML
What was the role of investors in that? Because I'm sorry, I pushed you. I was just sort of diving in because I saw a chink of… because the ethos of the program is to give you a hard time, you understand that, so I will. But so your members responded they've come up with the standards. What was the role of your organisation versus, so somebody that I know, Adam Matthews, I think it was from the Church of England Pension Fund, who was also very involved in the response of investors to the Brumadinho and other tailings dam collapses. So how did you work with investors there?

RD
So the investors were represented by a body called PRI, the Principles of Responsible Investment, of which the Church of England is only one part. And in that case, they played a representative role.

ML
There was some committee, I believe, that he played a role.

RD
There was a process called the Global Tailings Review, which was a multi-stakeholder body that brought together the investor community, brought together impacted local communities, government representatives, the United Nations, the industry. And that is what created the Global Industry Standards. It wasn't built by the industry alone, it was done with input from a variety of sources. But I think you're asking exactly the right question, Michael, which is, how do investors think about responsible mining? If I can be completely honest with you, I have been disappointed by the lack of interest and engagement from the investor community in asking the hard questions, just like you're doing of me, for us as a mining industry, about what we're doing to mine responsibly, and then making investment decisions off the back of the information that they then learn.

Now, Michael, I'm not pretending for a second that investors are bleeding heart sustainability people. They need to make money and returns for the investors, I get that. But to me, the case is patently clear that following standards of responsible mining is the best way to de-risk your operation and to improve the risk-adjusted returns that you can expect as an investor.

ML
Let's keep going on the sort of rules of engagement, the rules of membership. You said that they, in the example of tailings, they now have to follow the, what do you call it, the…

RD
Global Industry Standards.

ML
Global Industry Standard. And what happens if they don't, what happens if a member doesn't? 25 years, has a member ever left or been asked to leave the ICMM?

RD
Members have left voluntarily, they've then rejoined. New members have joined ICMM. And we have agreed for members to leave the body, too. So, for instance, Polyus, a gold producer from Russia, was asked to leave the membership when Russia invaded Ukraine. Members have chosen to step back and come back in. The main way that members are expected to demonstrate conformance with our mining principles, and we have 10 mining principles, which are a condition of membership, is they have to publicly disclose an audited assessment of the extent to which they are meeting the mining principles. Now, in each case, the auditor will confirm whether the company does not meet, partially meets, or fully meets the expectations that are put on them. And that is plain for everyone to see. And we don't expect that every member will be meeting fully every expectation, because if that was the case, we would have set the bar too low.

ML
And when you say the auditor, who's the auditor? Do the companies self-audit, or do you choose an auditor to…

RD
We don't choose. The company chooses its own auditor, much like in financial statements, a company would produce a set of financial statements, which the auditors would then certify.

ML
And are these specialist companies, because it's not a financial audit, it's a process, it's a, I don't know, can I call it an ESG audit?

RD
A sustainability audit, that's right.

ML
It's an environment sustainable governance audit.

RD
But many would use their financial auditor to do that. So the big four firms, KPMG, Deloitte, EY, PwC, they often provide the audit services. There are some specialist auditors too. And actually, you're touching on a very important point here, Michael, one of the constraints in the system right now is that there aren't enough qualified auditors to provide the assurance that companies are meeting these responsible mining standards. We're trying to increase the audit pipeline to help with that.

ML
And how do you deal with the criticism or the suggestion that I'm about to make, which is that, okay, these are great big companies, they're very profitable. The industry's got 15,000, 20,000 players, and the big companies have got together to try to essentially, first of all, whether they are or are not meeting their own standards, they're trying to increase complexity to lock in their own position as leaders. Because it's going to be much harder for a small company to do some of these things, is it not?

RD
It may be, but I think we have to follow and agree a very simple rule, which is that if you can't mine responsibly, you shouldn't be mining at all.

ML
And maybe let me rephrase that question in a less kind of negative way. What's your model for getting those principles spread across the industry? Because there is a well-trodden path of large companies trying to raise the bar on regulation because they know that it's to their advantage.And we've seen that perhaps even some oil companies and gas companies have been accused of that. But let me phrase it in a more open way. How are you trying to influence the other, you've got one third of mines, so two thirds are not covered, presumably you'd like them to be?

RD
Ideally, yes. Ideally, I'd want every one of those 16,000 mines in the world to be following a responsible mining standard, and we're not there yet. There are a couple of main levers that we're trying to pull to achieve that, Michael. The most significant of which is that in a few months from now, we will have for the first time ever, a common global mining standard that takes the ICMM principles and combines it with three of the other most widely used frameworks into one common framework. I think we'd be the first sector to achieve that at the scale at which we're talking here, which then means that if you are a mid-tier producer that isn't directly facing customer pressure or investor pressure to follow these rules, you know that if you did, you would be part of a much bigger global community doing the same and are much more likely to get credit for doing so.

Because right now, Michael, you might be sitting there thinking, I want to do the right thing, I've committed to operating well, but which standard do I even follow? Because if I did one and it's not the one that wins, I don't necessarily get the credit for it. So it's been four years of work to get to this point where we will have, in 2027, a common global mining standard.

ML
And is that framed around your 10 principles?

RD
They're a big part of it, but we combined it with the others.

ML
Now, you've mentioned one area, which is tailings. Let's get very concrete, what are the other nine?

RD
Well, I won't be able to rattle off all nine for you. But essentially, it covers, think about all the ways in which you think mining interacts with society, our principles cover them. So many people may be concerned about how miners uphold human rights in the way we mine, that's a major priority of our mining principles. Many people are rightly concerned about how the rights of Indigenous people are protected, given that they have suffered persecution in the past, and that's a major part of our mining principles. Health and safety of our workers and our communities is, as you would expect, absolutely central to responsible mining and the mining principles, how we ensure minimum waste from mining, how we take care of nature, water, these are all the core tenets of the ICMM Mining Principles. And they are the basis on which this common global standard is created, which takes our 25 years of experience of doing this with the cumulative experience of the three other partners to create the standard.

But once the standard's in place, Michael, what I really hope, my dream is that companies, investors, and governments genuinely get behind this and say, hang on, if we're all committed to a fairer, better world, and we know, as you said in your introduction, that mining is going to have to grow to supply the world with significantly more metal, then we're going to make sure we do everything in our power to recognise companies that are trying to do things the right way, incentivise, and in some cases, yes, penalise companies who don't necessarily follow those same high standards. Because that is when we will move from a minority of the industry by mines to a majority of the industry following the right standard.

ML
You've got your 26 members, so the theory of getting, of influencing the industry is that by working, you talked about this process in a few months. So it's not by trying to get everybody to sign up to become a member?

RD
No. Anyone is welcome to become a member, of course. And it's a very competitive process, not because there's any barriers to entry, other than demonstrate that you're meeting these high bar principles.

ML
Except that, do you have to meet them, or do you just have to disclose them?

RD
No, you have to be meeting the majority of them. Like I said, I expect everyone to have some level of gaps to close, because that's telling you that you've set them at the right level. And many companies do apply to become members, and they don't make it. An independent panel will look at your application and say, but you're not even close to meeting the majority of these requirements. So please spend some more time doing that, and you'd be welcome to apply when you're ready.

ML
Now, those principles, you listed a few, and I'll give you a pass. I'll say that it was nearly nine, nearly the other nine. And the one that I find most appealing, compelling, is the prior informed consent. Talk about that for a second, if you could.

RD
Yeah. Look, a very fundamental tenet of the rights of Indigenous peoples is that it is the duty of states to obtain their free, prior, and informed consent before authorising any activities that may impact on their rights. That draws in international law from the UN Declaration on the Rights of Indigenous Peoples. Complementary to that are the UN Guiding Principles on Business and Human Rights, which make it very clear that it is a company's duty to respect that right of free, prior, and informed consent of Indigenous peoples. And so the ICMM has had a position on the rights of Indigenous peoples from 2014, which we updated a couple of years ago, which reiterated our commitment to respecting that right to free, prior, and informed consent from Indigenous people.

ML
Okay. So this all sounds wonderful, incredibly cuddly, but you have got a lot of coal miners in your membership. Is there anything about your principles that says that aggressively expanding coal mining is not a good thing, or could you aggressively expand your coal mines and still be a member in good standing of your organisation?

RD
Well, the requirement from a climate point of view is very clear in our principles, which is you have to achieve net zero scope one and two emissions by 2050 or sooner, and you have to take action on scope three emissions too. So we don't take the view that other industries have, which is scope three is not our problem, we don't say that. You do need to absolutely account for your scope three emissions. We have a consistent way of doing that, and you have to bring them down.

ML
Let's just do scope one and scope two, scope three, just for the information of the audience in case they've forgotten, because I'm sure they all know. Scope one, scope two, those are your own emissions, emissions embodied in energy services or energy that you buy, electricity, etc. But then scope three is the energy in the lumps of coal that your members sell.

RD
That's right. And that some people would argue is not your responsibility because it's the consumer that consumes them. We don't take that view. Yes, it may not be things that you can directly control, but you can absolutely influence them. And so we want to make sure we play an active role in decarbonising the entire system. So let's deal with the issue of coal, now, first thing to say, of course, is that there are two main types of coal that we produce. There's thermal coal, which is the coal that goes into power stations to generate electricity. That's responsible for a huge portion of manmade climate change. That's what most people think of when they think of coal.

There's also metallurgical coal. Now that's the coal that you use to combine with iron ore to make steel. And in that process too, you generate emissions, but the coal isn't combusted for energy as it is in the case of thermal coal. In the ICMM, you have companies that produce both thermal coal and metallurgical coal. Now, the producers of thermal coal have made a commitment that they will play their part in reducing the direct emissions from their production and in making sure that production over time is phased down. The uncomfortable truth, Michael, for me, and I really struggle with this, is the world continues to consume very large quantities of coal and for the foreseeable future will continue to do so, especially in Asia. I feel better knowing that that coal is being produced as responsibly as it possibly can for the period of time that we are consuming it. I will be the biggest advocate to end coal use as soon as possible in the context of a just transition. Absolutely, no question about that. And while that is happening slower than any one of us would want, I would much rather it's an ICMM member producing the coal than a non-ICMM member.

ML
I'm sure that's right. I'm sure that it'd be much better because, of course, they could just sell a coal mine, sell their coal mines, then who knows who's going to own them and how they're going to be operated, fine. But there's something a little bit slippery going on here because you say they have to take action on their scope three, but then you say I'd much rather they continue to own those mines. Okay, fine, but what action do you expect them to take? What is that action, concrete?

RD
Well, let's take metallurgical coal because it's even clearer in that case. You have mining companies co-investing with steel companies to replace coal with hydrogen in the steelmaking process. That's real dollars, real R&D, real time and money going in to making sure that the demand for metallurgical coal falls so we can replace it with hydrogen. They don't technically need to do that. That's actually counter to your short-term interest to do so.

ML
But it is a tiny fraction, a tiny fraction of their capital expenditure and most of that has been put on hold because it's an extremely expensive pathway to steel. And so what you've got is a lot of the steelmakers that are still, they're looking at that process essentially, there's two parts to it. One is moving from metallurgical iron reduction, metallurgical coal iron reduction to direct reduction.

RD
Yes.

ML
And so what a lot of the steelmakers are doing is they're moving to direct reduction using natural gas, using fossil gas, but not taking the step to hydrogen because that's the very, very expensive one. And all of that is tiny compared to what they're doing in terms of just continuing to sell metallurgical coal. So I mean, if that's the best example, I'm not sure I'm enormously convinced.

RD
Well, if we agree that hydrogen is the best way to decarbonise steel production, or at least a primary way, I would want companies of any influence, including mining companies, to be helping bring that future forward because we produce 2 billion tons of steel a year. Each ton of steel generally produces about 2 tons of CO2. That's 4 billion tons of CO2 that comes from steel production. That to me is a prize worth chasing and making sure that we're doing everything possible to bring that down as much as you can.

ML
I don't want to go too far down the hydrogen rabbit hole because you may not know, but the audience here will be going, oh, you know, Michael's off on his hobby horse because it is certainly hydrogen for steel is a pathway. It's actually one of about six or seven pathways. If you really wanted to reduce steel use quickly, what you'd probably do is say, well what we'll do is put our shoulder to the wheel of fiberglass using fiberglass rebar. So GFRP rebar, because that would actually reduce the demand for steel, reduce the demand for metallurgical coal, which is, of course, what all of your members are really trying to do. Reduce demand for their own products, right?

RD
Not all of them are doing that. What they're doing is responsibly producing the product in line with where the world needs to go. But think about this, Michael, think about this.

ML
Sorry, but you've said they have to take action on scope three.

RD
Exactly.

ML
Why don't they promote GFRP rebar then? That would really be taking action.

RD
They may well be. I'm not sure, Michael. I don't know exactly every company's commercial strategy, but they may well be doing that. But take this as another thought, if you were to replace a low quality metallurgical coal in the steelmaking process with a higher quality metallurgical coal in the steelmaking process, when I say quality, what I mean is extent of impurities, the purity of the coal and the energy content, that can make up to a 30% difference in the emissions that are generated. So again, a steel mill is going to keep operating. Would you rather that steel mill buy the best quality coal produced the best way? I think so, because that is making a dent in our climate problem. And yes, absolutely, people can say we should be consuming no metallurgical coal, I would love that future, trust me. But I have seen enough to know that that won't happen overnight.

ML
I mean, it's a lovely argument. It's kind of the Airbus Boeing argument that the best way to deal with emissions from aviation is to sell new aeroplanes, because new aeroplanes are better than old ones. There are no easy answers, so forgive me, I'm pushing you.

RD
Please do, I love the debate, absolutely.

ML
So companies can continue to be coal producers, and in fact, there's no requirement for them to reach net zero scopes one, two and three by X year or anything like that.

RD
It's scopes one and two by 2050, not scope three.

ML
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ML
I want to move on actually and talk about, while I've got you, I'm going to talk about the mining industry overall. Because, okay although I give you a hard time, I don't see an alternative to proceeding the way that you're proceeding, right? So from now on, I'll give you a pass on that.

RD
Don't, no I love your questions.

ML
But doesn't it push up the cost of mining and slow down the opening of new mines? All of this consent, all of this ESG, all of these principles, and isn't that, in the end, actually negative? Because what we really need is lots and lots of metals and minerals quickly for electric cars and solar panels and wind turbines and batteries and all of the other clean energy equipment. So is it a self-defeating exercise to try to bring the mining industry, I don't want to say to hold them to account rather than bring them into the 21st century, but holding them to account, improving their standards, does that have a negative impact on the transition?

RD
Well, it sort of depends on whether you think the ends justify the means. And a commitment to mining principles tells you that the ends don't justify any means. That just because we need metals and minerals for the energy transition does not mean that we can or should run roughshod over the rights of people. It does not mean that we can or should destroy nature in the process. Ultimately, we'd be making the problems we're trying to solve significantly worse if we were to do that. And so in the short term, does it create added complexity or time for you to make sure you have the consent of the local community, that you've done your proper environmental baselining, that you've taken the right precautions to make sure that you don't pollute the water? Yes, it may add a little bit of extra time in the short term. But my gosh, is that going to pay off over decades to come, if for nothing else than just for your own business. Because let me tell you, there is nothing more expensive for you as a mining company than to have your mine shut down on a day when it should be producing, but it's not because you've got the local community protesting at your gate, or because you've run out of water, or because you don't have adequate supplies of fuel, because they've been cut off by infrastructure that you didn't invest in.

So Michael, I mean, just from a pure enlightened self-interest perspective, investing in doing things the right way from the beginning is one of the best investments you can possibly make in the long-term sustainability of your business. Now, that's not to say that we can't also be smarter and more effective in how we permit new mines. Currently, it takes an average of 16 years nearly from first discovery to bringing a mine onto full production. That is way too long and we have no hope of reaching the goals of net zero if we don't shorten that. But that cannot come at the expense of the standards for mining responsibly. That really would be self-defeating and so there are ways we can manage around this.

Governments typically require you to do things in sequence, once you've done step A, then you go to step B, then you go to step C. Let's do more things in parallel, do step A, B, and C in parallel, get to a stage gate, make a decision, get to the next stage gate. That's one way to do it. Another way to do it is to use new technologies, including artificial intelligence, of inferring information rather than needing for all of it to be collected through primary sources. That's another way to speed things up. So you're absolutely right, we do need to do things differently. We do need to speed things up, but never, never, never at the expense of standards.

ML
Free, fair, prior, informed consent. I think I've added one there.

RD
Free, prior and informed consent.

ML
Free, prior, informed consent. But as soon as you do things in parallel, aren't you going to break that? Because if you start doing lots of engineering studies, or you start building all the roads, or you start signing offtake agreements, whilst you're talking to some Indigenous community and looking very earnest, which you're very good at, and very, very trustworthy, and saying, no but honestly, we're listening to you, but of course, they know that you're building roads, or they know that you've already ordered the mining, the equipment, and so on. I mean, does it really work?

RD
It's such a good question, Michael. You're really getting to the heart of what it takes to bring a new project online. The commitment to respecting the free, prior, and informed consent of Indigenous peoples relates to activities that have a direct impact on their rights. Now, a government may issue you the authorisation to proceed with the design of a project without impacting the rights of Indigenous peoples. So you could be doing some studies over there that have no impact on the rights of Indigenous peoples, and advancing that study does not impact their rights. That is completely legitimate for you to progress.

ML
I'm going to keep pushing, though, because ordering equipment, building roads, they also don't infringe on the rights necessarily. The road might, so you could say, no, we haven't infringed on your rights at all, we've just ordered a billion dollars worth of mining equipment. And they know, anybody with half a brain will know, that that means you're going to expect to get the permit. And the government's going to be under enormous pressure to give you that permit, right? That's the reality.

RD
Well, if I, as a company, forget about the permit for a second, have voluntarily committed that I will respect the rights of Indigenous peoples, then the permit is not my authorisation to mine. It's getting that commitment of agreement from Indigenous peoples. So actually, if I'm the one ordering all this equipment, it strengthens the hand of the Indigenous community to make sure that I achieve the agreement with them. Because now I've invested all this time and money into this. And so a company will have to calibrate very carefully about the level of trust they have with that community to proceed on the basis of, I'm going to be doing some pre-feasibility and some scoping work over here, I'm not going to do anything that impacts on your rights until I have agreement with you, even if I may have the legal authorisation to proceed.

And done well, we have seen many examples, Michael, of this happening, where communities want mining. They want mining on their terms and on terms that don't violate their rights. So I would hate to also paint this always as an antagonistic confrontational exercise, which in many cases it's not. But Indigenous communities need to know that if you are serious about respecting their rights, you will not undertake project activities that impact them, but you may indeed advance your planning. And the two are not mutually exclusive.

ML
What about the value chain? Because so far we've talked a lot about extraction as being what you grew up with in South Africa, the mine. But of course, there's a whole value chain and there's value and there's money and there's good jobs, there's engineering jobs further downstream, but very little of that is ending up in mining areas in those Indigenous or other communities. So how does one deal with that? Is it a romantic idea to think that more of that value add could end up in Africa, but also other parts of the world which are poor and remote, and where they're ending up hosting the mine, but not getting huge amounts of value other than the primary extraction and the jobs associated with that?

RD
I love this question because I'm going to say things that people may disagree with and may seem controversial, but I feel very confident and we have the information to back this up. The first thing I would say is that countries where mining happens are on average healthier, wealthier, and better educated than their non-mining counterparts. So this idea that mining somehow makes your country poorer just does not hold up to scrutiny. And there are many examples of countries, my own South Africa was built off the back of mining, Botswana, Chile, there are many examples of countries who are developed and prosperous today relative to where they might have been because of their mining industry. So that's the first myth I would love to dispel that people may hold, which is that mining somehow imposes a curse on countries.

Now, there have been cases, not just mining, but natural resources more broadly, oil and gas, that have proven to be a curse on those economies, but it's not at all the expectation we should have that mining would lead to worse outcomes. The second thing I would say, Michael, is that in the last 10 years, for every dollar of profit that the 26 companies in ICMM today, and however many there were over those 10 years, but the members of ICMM, for every dollar of profit we made, 36 cents on average went back to governments in corporate income taxes and royalties. That's before employment taxes, that's before other taxes. That ranks amongst the highest of any sectors. And so for people to say that the industry does not contribute back to host countries, just doesn't stack up with the data.

ML
That's quite a defensive answer because I asked whether they could, whether it could be, whether the value chain could move to closer to where the extraction happened. And you went off on this kind of, we're not really that bad, which was maybe implied in my question, but it wasn't really. That wasn't the main thrust of my question, let's come back to the value chain.

RD
Let's come back to the value chain, but we can't talk value chain if we don't understand the basics around the extraction side of it, which is why I wanted to lay the facts on the table. I would go even a step further. I don't want to come here and say we're not that bad, I think the industry is a powerful force of good. I don't think I have to convince people that we're not that bad. I think done right, it is a powerful enabler.

ML
But could it be better?

RD
Of course it could.

ML
Could it provide more jobs, more value added to some of these countries?

RD
Absolutely. And therein lies, I think, a misguided idea that has taken hold, particularly in my continent of Africa, which is that the best way for countries to benefit from mining is to move down the value chain into the refining and smelting side of the business. I think that is a misguided idea because the economics, the job creation potential, the tax revenues, the broader multiplier effect on the economy are much stronger upstream on the mining side than they are on the refining and smelting side. Allow me, Michael, just for a little deep dive into the economics of how this works.

Now, if I'm the miner and you're the smelter and refiner, let's take a commodity like copper. You would take my concentrate and you would refine and smelt it into the products that a car company would then buy from you. Now, because you're doing that, you would typically charge me something called a treatment charge, which is levied per ton of concentrate. In normal years, I don't know what's normal anymore, but certainly over the last few years, you would charge me $80 a ton to take my concentrate and produce it into more finished products. Today, you are paying me $280 per ton of my concentrate. So while you should be charging me, you're paying me and then you're incurring the cost of doing that. Now, this is important, Michael.

ML
Let’s unpick why this is happening.

RD
The reason why that's happening is because there's a shortage of mined commodities. So you are competing for my concentrate and that's driving the price and the margins for you down. So you are operating at a loss because you have to get your hands on the concentrate because your smelter has to operate at a minimum of 70% utilisation.

ML
But to what extent though? So, okay, so you've got a smelter, you can't switch it off because that's it, it's toast, so you're actually competing for concentrate.

RD
That's right.

ML
And you're paying to keep the smelter going and making a loss. Now, so that's the reason for that switch. So it was a tolling arrangement where the smelter was charging, you want to use my smelter, you better pay me, fine, but it's flipped. Okay, to what extent is this overcapacity in smelting driven by China?

RD
The overcapacity in smelting is largely because of Chinese operators being able to operate at a loss because they are state subsidised. So if market forces were operating normally, then smelters who are operating at a loss would go out of business, demand and supply would normalise and you'd get a new price equilibrium. But because China has such a significant share of the global smelting and refining market, and because they operate on incentives other than just pure price because they're state subsidised and this is a very strategic sector, that overcapacity continues to persist. Now, Michael, what I'm amazed at...

ML
Let me just push on that because what you said, therefore, the response is that mining extractive economies, Africa or elsewhere, simply shouldn't get into smelting because it's a bad business. But isn't there a separate problem, which is why is it a bad business? Why are we tolerating this essentially, I mean, it's a coercive approach to overinvest in smelting, not to shut it down when it's loss making. And it's bad for the mining economies because they can't move into a higher value-added activity, and it's bad for the customers because we end up, we the importing nations, end up at the, I don't want to say at the beck and call, but we are, China is in a position of power over the buying countries, the importing countries.

RD
Look, I think we need to deal with the world the way it is, not the way we wish it were. So yes, ideally the world would be different and China may not have that much control.

ML
Or we should fix the world and it may not be up to ICMM to fix it, but it does seem to need fixing.

RD
Ideally should operate better, but it'll be a futile exercise to reverse decades of investments that China has made into smelting and refining to truly change the market. Now the West is finally waking up and is subsidising smelters in their markets. Australia has just given a big package of support to smelters, Canada has just given a package. Now, Michael, let me ask you this. If smelting and refining were such a good business, why are taxpayers having to fund the continued operation of them? It's because they don't make economic sense. So I don't think you can in good conscience, as any individual, recommend to a low or middle income developing African country to attract that part of the industry on your shores that would not operate without a subsidy.

And here's the other thing, there is this perception that as you move into more of the value added product that you're getting more tax revenue, creating more jobs and bringing more benefit to the economy. That is not true. A smelter, a modern day smelter today, if you're lucky, will employ a few hundred people, a large mine will employ tens of thousands of people. So why we seem to be obsessed that smelting and refining is the way to go when actually from a job creation, tax and broader multiplier effect, you're much better off investing up in the value chain rather than down.

ML
Okay. So, and I think first of all, I find this very interesting. And so thank you for the education. But what it essentially says is that smelting is a terrible business, but that is in a sense between, I don't know, Europe, the US, Japan, Korea, the advanced, the economies that are purchasing the output of smelting, the supply chain in the case that I'm interested in, the clean energy supply chain, it's up to them to fix the problem. Okay, fine. But that does open up a separate question, what is it that will enable those mining economies to move up some kind of value chain? Or are they just destined to be mining economies forever?

RD
Well, let's look at the two most successful economies built off the back of the mining industry, Chile and Australia. Neither of them have any significant value addition in-country, they export a lot of their raw material. That tells you that you can be a prosperous, wealthy nation without needing to have the downstream value addition.

ML
But you can go to those countries. I did a Deep Dive Australia, nine episodes, and I can tell you everybody is concerned about why would you be extracting iron ore and fossil gas and then shipping it to China and also spodumene, which is lithium, and all sorts of rare earths. And they are agonising about not moving up the value chain themselves. So it's not like they sit there and go, we've worked it out, just do the mining, mate, you'll be fine. They're actually agonising about this question.

RD
There are healthy questions to ask, but we must ask them in a very clear-eyed way. Because even if you took the direct economics of smelting out the question, Michael, two other things are major factors on whether downstream value addition is the right choice for you. In fact, three. One is, if you don't have abundant, cheap and reliable power, do not even think about going down the value chain, because that will make your operations entirely unsustainable. The second is, it's typically better for smelters and refiners to be closer to the demand center than to be further away from the demand center. Because they can respond to changing customer needs and specifications much more easily than if you're located a 20-day ship ride away.

And the third thing is that a smelter and a refinery will rarely take a feed, a feedstock from just one mine. They're brilliant at blending to get the right proportion of chemical composition that goes into the production process. So if you're operating in a country where you have a couple of mines, both producing the same quality output of say bauxite, and you try and build an aluminium smelter there, you will end up importing ore from other countries to get the right blend so that you can then create aluminium that you can sell. It just wouldn't really work, and that's before we even get into the argument about ports and infrastructure and logistics.

ML
A great example of this, by the way, I believe in Sweden, the hydrogen steel production, they're actually importing the ore I believe from Canada because it isn't quite the one, the stuff they have in Sweden is not quite right. But you mentioned then, you said that, OK, the answer is not what everybody talks about that you should move, I'm trying to remember if it's up or down, to move downstream and start making battery, don't do just the rare earths, but do the battery, the anode and the cathode and so on. You said instead go upstream, what does that mean? Does that mean improving extraction technology or what were you referring to there?

RD
I think there's a big opportunity for resource rich countries to require or incentivise the equipment used in the mining process to be built locally. So miners buy large quantities of giant trucks, shovels, diggers, bulldozers, in addition to all the other things that it takes to make a giant mine work. A lot of that, if you're a, say, an African resource rich economy or a Latin American resource rich economy, you're importing from outside from these big companies like Caterpillar, Komatsu or Sandvik. I think there is much more job and value creation potential if you make those in country and that way go up the value chain rather than looking down.

ML
And would the equipment be electric or would it be, are they not more likely just to make a localised version of what was being made in the West or in the West plus Korea, Japan 15, 20, 30 years ago?

RD
Well, Michael, that to me sounds like a perfect recipe to end up with a white elephant and a stranded asset if you were to do that. That would be very short sighted because the future of this industry and its equipment is largely electric, and that's the direction we're headed in. Of course, the pace will differ from region to region, but ultimately, electrification of equipment is a big trend in mining.

ML
Do all of your members agree with that?

RD
Yes, all of them are on a path towards electrification in some respect or the other.

ML
Including BHP? Yes. Because they, when I was in Australia, the big news was that they've decided that Fortescue, saying that they'll be fully electric by 2030, is, what BHP is saying is the equipment doesn't exist, we can't go electric. And that was a big news story. And I was very surprised to hear that because what they said was the equipment doesn't exist, it's not being made. And I looked at that and go, well, hang on a second, you're BHP, you are the demand function. If you say the equipment should exist, it'll exist, and if you don't, it won't. So now you're saying, oh, no, they're completely on board.

RD
Look, I can't speak for BHP. What I can tell you, though, is that BHP, as the biggest mining company in the world, has been an active part of our collective efforts to drive electrification of mining equipment. Now, each company will have different use cases, different mine sites, different availability of infrastructure so you can't expect them all to move at the same pace. In the case of BHP, they operate in the Pilbara. I'm sure you visited when you were in Australia. And people who've never been to the Pilbara probably can't imagine the scale of the mines that a company like BHP operates.

ML
I'm waiting for my invitation from BHP, or actually from Fortescue or anybody else operating in the Pilbara, because I've not been.

RD
OK.

ML
But I'm aware that the scale is colossal.

RD
But just for the audience to understand this, Michael, the trucks that they operate there can carry up to 500 tons of material in one payload. Now, it might be hard, again, to get your head around 500 tons. Well, let me say this. One fully grown African elephant weighs about five tons. Imagine 100 elephants on one truck, electrifying that is not a straightforward exercise.

ML
So I had somebody on social media a few years back, who said, you've got to understand the scale of this and how ridiculous you're talking about electrification is, and accompanied this little rant with a picture of a truck which was actually electric. So they do exist.

RD
Of course they exist. I've been and seen many electric trucks of my own accord. But electrifying a 100-ton dump truck compared to a 500-ton mega truck is a very different exercise. Now, consider this conundrum, as you electrify these large vehicles, you're moving electricity on the truck of a voltage and capacity that is almost unprecedented. And we're starting to face a major new safety risk in the industry called electric arc flash. This is when electricity essentially jumps through the air and can electrify the operator. Mining companies, if they're truly serious about responsibility, their first and unwavering commitment will be to keep people safe.

And for many people, that is holding them back from fully embracing electrification until we can find a solution to electric arc flash as a potential risk to the operator. So although on the surface people might say, well, this is a company that isn't really serious about electrification, that does not chime with my experience because these companies are genuinely committed. And trust me, it is in their economic interest in the long term to do so. But each has to consider many factors, including safety, including fleet replacement cycles to make sure that this is done in a sustainable way.

ML
I had a very good conversation with Mark Cutifani, which was, I think it was episode 158 of this conversation. And we actually ended up we had a side discussion about health and safety, so I would definitely endorse the need to, absolute need to do it safely, the absolute need. But let's not go there because meanwhile, they're doing all sorts of things that are dangerous and it's not like your industry has reached zero fatalities using the conventional equipment.

RD
Unfortunately not.

ML
Are there any other technological or industry issues that you think we should touch on? We've got a sulfuric acid lack at the moment, which is used for copper winning, is that speeding up a shift to electro winning or to different approaches to extracting not just copper, other minerals?

RD
Yes, look, the sulfuric acid shortage is both temporary and chronic. It's temporary because the Middle East accounts for a very large portion of sulfuric acid exports. The price of sulfuric acid jumped from about $300 a ton to nearly $2,000 a ton, adding significant costs to producers of copper, and over the long term, of course, companies want to isolate themselves from similar shocks that may occur in the future. Now, of course, leaching, for which sulfuric acid is absolutely essential, is one of the most promising ways to be able to access lower quality ores of things like copper. So there will continue to be a need and a role for sulfuric acid in future leaching technologies, which allow you to access, you know, even less than half a percent of copper concentration in a wall. That's clearly one aspect we're looking carefully at.

Another aspect is how we can be more efficient in the rocks that we actually select to put into crushers and millers and grinders, because ultimately, that's what's creating a huge amount of the waste that's coming out at the end of the process, the tailings we talked about earlier. And there's some really exciting new technology that is a sensor on your shovel. So when there's been the blasting and you've got the rock lying in a pile, the sensor can sense whether the ore it's picking up after is the right concentration, the right size, or it can just sort it and leave it there to be able to be able to dispose safely and then minimize the amount of waste rock that comes through at the end of the process. I'm quite excited about that as a technology. And then something I saw recently, which really gave me so much hope, Michael, for a future that is safer, more productive, more efficient and more diverse from a workforce point of view, we're seeing companies, particularly in Chile, that have created remote operating centers of their mines.

So the mine will be located thousands of kilometers away, often in the high Andes, and yet there is a team of operators sitting in a skyscraper in Santiago operating joysticks with screens in front of them that resembled more like a Formula One pit stop crew than it did a mining crew, operating autonomous equipment safely from a distance, making sure that operations are running smoothly and they're able to do it. And the great part was there was such good gender balance in that workforce, which isn't always the case when you go to the mine site, which continues to be male dominated.

ML
But that is removing the highest value jobs from the local area, right?

RD
It can, but you can also do it really well. So Anglo American companies whose facility I went to visit, not a single person lost their job as a result of creating this remote operating center. They retrained those people to perform other jobs at those sites or they will move to other sites or they were brought into the remote operating center. So companies who are doing this also are doing it from a place of responsibility that they can't just hollow out the local workforce.

ML
And finally, you mentioned that in a few months you're going to be launching this grand unified standard. Anything else or is that associated with the Mining Indaba in South Africa in February, are you going to be doing it there? Because I'm going to be going to Indaba, you can tell I'm fairly early on in my journey of understanding the intricacies of your industry, are you doing that in South Africa at the Indaba or elsewhere?

RD
It will be launched before the Indaba, but it will be a big talking point at the Indaba because it is going to mark, we believe, a watershed moment in the history of the mining industry for there to now be a common global framework that people will follow. So I'm sure you'll hear of it at the Indaba, but it will be launched before, it'll be launched in January. And one thing I really want people to understand about it, Michael, which is really special, is this is not the industry writing its own rulebook and then saying to people, trust us. This is a board that is made up of a diverse group of perspectives from different stakeholder groups, Indigenous people, civil society organisations, customers, investors, they all have a role in overseeing this global mining standard. And that will be launched early next year, pre-Indaba, and companies can then sign up into the system from March onwards.

ML
Ro, I promised to give you a hard time and I did, but you've given me an education. And so I want to thank you for coming in, spending a bit of time here with us today, and also being gentle in your responses to my somewhat naive questions.

RD
They were great questions, Michael, I've loved it. Thank you for this and thank you for all that you do.

ML
And I look forward to seeing you, I'm not sure if I'll see you before the Indaba, but certainly at the Indaba, and no doubt my education and my hard time that I'll give you will continue.

RD
And let's get you to a mine site soon.

ML
Very good, that's a deal.

ML
So that was Rohitesh Dhawan, President and CEO of the International Council on Mining and Metals. As always, we'll put links in the show notes to resources that we mentioned during our conversation. So that is episode 151 with Mark Cutifani from January 2024, I misspoke during the episode, I thought it was episode 158. It's not. Also links to the websites of the ICMM, of course, and to the 2027 Mining Indaba, which will take place in Cape Town in February.

So I'd like to thank our producer, Oscar Boyd, video editor, Jamie Oliver, head of operations, Kendall Smith, the whole team behind Cleaning Up, our Leadership Circle, without whom none of this would be possible, and you, the audience, for spending time with us today. Make sure you've subscribed to this channel, either on your favourite podcast platform or on YouTube, and sign up for our free newsletter at cleaningup.live. And please join us this time next week for another episode of Cleaning Up.

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